Activision’s ‘Call of Duty’ Sets It Apart as EA and Take-Two Stumble

After a pandemic-fueled boom, most major gaming companies disappointed investors in 2022 due to a thin release schedule and an economic slowdown that kept a lid on sales of all but the most popular titles.

Ubisoft Entertainment SA, Nintendo Co., Electronic Arts Inc., Take-Two Interactive Software Inc., and GameStop Corp. all posted results for the last quarter that missed Wall Street’s expectations or shared disappointing outlooks for the beginning of this year. Last year, there was a dearth of blockbuster game releases and several anticipated titles slipped into 2023. Many of the big games that did publish, like Ubisoft’s Mario + Rabbids: Sparks of Hope or Take-Two’s Marvel’s Midnight Suns, didn’t see the kind of demand publishers had hoped.

Activision Blizzard Inc. stood out in a sea of grim results for one clear reason: Call of Duty. The latest installment of the blockbuster series, Modern Warfare II, topped $1 billion in sales in 10 days in October and was the best-selling game of 2022, according to industry researcher NPD Group. Those results helped boost bookings 43% in the last three months of the year, the biggest jump in nine quarters.

“Consumer wallets have clearly tightened for everything but the blockbusters,” analysts at KeyBanc Capital Markets wrote in a note following the results.

Take-Two Chief Executive Officer Strauss Zelnick conceded as much in his own comments on the company’s results, which saw the publisher of Grand Theft Auto and Red Dead Redemption cut its outlook for bookings in fiscal 2023 and give a disappointing forecast for the current quarter.

“We believe that consumers shifted their holiday spending toward established blockbuster franchises and titles that were offered with pricing promotions in light of macroeconomic conditions,” Zelnick said. While Grand Theft Auto is one of the most lucrative game franchises of all time, Take Two’s next installment in the series doesn’t have an official release date.

Still, while a lot of the market depends on a much-hyped new release, the industry is also learning how to milk existing hits for years.

Many top gaming titles are no longer a one-time $60 purchase. They are designed as endlessly replayable social experiences constantly refreshed with new content. So-called service games like Grand Theft Auto V, launched in 2013 from Take Two subsidiary Rockstar Games, is still seeing sustained sales. Last quarter it surpassed more than 175 million units. In these games, players continually purchase digital items or content expansions for months or years post-release. According to EA Chief Financial Officer Chris Suh, revenue from live-service games such as Apex Legends accounted for 75% of the company’s business over the past 12 months.

In 2022, the top 3 games by monthly active users were released in 2017, 2011 and 2013, according to gaming analytics firm NewZoo.

Many analysts expect the industry to turn a corner this year. A packed calendar of buzzy releases from Activision Blizzard, Nintendo and Square Enix Holdings Co. could drive a rebound. On Friday, Hogwarts Legacy, inspired by the Harry Potter series, will be released from Warner Bros. Games. In mid-January, pre-order data on the game indicated sales could break records.

Shares in Activision and Take Two were up more than 5% on Tuesday, while EA gained about 1%.